Question 1

A factor engages in accounts receivable financing for business by purchasing accounts outright and assuming all credit risks.

Accepted Answer

A) True 
 B)False

Question 2

Commercial finance companies:

Accepted Answer

A)  make riskier unsecured business loans but charge higher interest rates 
B)  specialize in loans secured by inventories and real estate 
C)  concentrate their lending activity to firms pledging the notes receivable of their customers 
D)  are primarily interested in loans secured by a business customer's accounts receivable and inventories 
A)  make riskier unsecured business loans but charge higher interest rates 
B)  specialize in loans secured by inventories and real estate 
C)  concentrate their lending activity to firms pledging the notes receivable of their customers 
D)  are primarily interested in loans secured by a business customer's accounts receivable and inventories

Question 3

The practice of compensating balances is diminishing.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following organizations are involved in accounts receivable financing for businesses?

Accepted Answer

A)  consumer finance companies 
B)  commercial finance companies 
C)  factors 
D)  commercial finance companies and factors 
A)  consumer finance companies 
B)  commercial finance companies 
C)  factors 
D)  commercial finance companies and factors

Question 5

Which of the following is not a reason to use factoring services?

Accepted Answer

A)  it is a form of guaranteed payment 
B)  it eliminates overhead 
C)  management is freed from concern with financial matters 
D)  lower cost 
A)  it is a form of guaranteed payment 
B)  it eliminates overhead 
C)  management is freed from concern with financial matters 
D)  lower cost

Question 6

The effective annual interest rate on a loan in which a company borrows $1,000,000 for one year at 8 percent and requires a compensating balance of 20 percent is:

Accepted Answer

A)  8.5% 
B)  9.5% 
C)  10% 
D)  28% 
A)  8.5% 
B)  9.5% 
C)  10% 
D)  28%

Question 7

A claim against an inventory when individual items are indistinguishable is called a complete inventory lien.

Accepted Answer

A) True 
 B)False

Question 8

A commercial finance company:

Accepted Answer

A)  has a bank charter 
B)  may not discount accounts receivable 
C)  may make loans secured by chattel mortgages 
D)  none of the above 
A)  has a bank charter 
B)  may not discount accounts receivable 
C)  may make loans secured by chattel mortgages 
D)  none of the above

Question 9

Where the factor pays the firm for its receivables before the account due date.

Accepted Answer

A)  Maturity factoring 
B)  Regressive factoring 
C)  Reverse factoring 
D)  Advance factoring 
A)  Maturity factoring 
B)  Regressive factoring 
C)  Reverse factoring 
D)  Advance factoring

Question 10

Service industries tend to have larger proportions of fixed assets to current assets.

Accepted Answer

A) True 
 B)False

Question 11

Short-term financing offers greater flexibility than long-term financing.

Accepted Answer

A) True 
 B)False

Question 12

In order to borrow $2,225,000 for a 7.5% loan on discount basis, the firm will actually have to borrow:

Accepted Answer

A)  $2,069,767 
B)  $2,391,875 
C)  $2,406,405 
D)  $2,571,266 
A)  $2,069,767 
B)  $2,391,875 
C)  $2,406,405 
D)  $2,571,266

Question 13

Which of the following might is not a characteristic of a field warehouse?

Accepted Answer

A)  it serves multiple customers 
B)  it exists only until the loan is repaid 
C)  a lease on that portion of the property which is to be used for warehousing purposes must be obtained 
D)  it is a secured warehouse 
A)  it serves multiple customers 
B)  it exists only until the loan is repaid 
C)  a lease on that portion of the property which is to be used for warehousing purposes must be obtained 
D)  it is a secured warehouse

Question 14

Firms using maturity matching will have current ratios equal to 1.0.

Accepted Answer

A) True 
 B)False

Question 15

The purchaser may deduct 2% from the purchase price if payment is made within 10 days; but if not paid within 10 days, the net amount of the purchase is due within 30 days. The sale is made on what terms?

Accepted Answer

A)  10/30, net/2 
B)  2/10, net/30 
C)  2/30, net/10 
D)  10/2, net/30 
A)  10/30, net/2 
B)  2/10, net/30 
C)  2/30, net/10 
D)  10/2, net/30

Question 16

The maturity matching approach is a financing strategy that attempts to match the maturities of assets with the maturities of the liabilities which they are financed.

Accepted Answer

A) True 
 B)False

Question 17

A short-term bank loan that is unsecured is referred to as:

Accepted Answer

A)  a line of credit 
B)  an accounts-receivable loan 
C)  an inventory loan 
D)  a life insurance policy loan 
A)  a line of credit 
B)  an accounts-receivable loan 
C)  an inventory loan 
D)  a life insurance policy loan

Question 18

Using the conservative approach for financing a firm's assets, long term financing would be used only to finance fixed assets, while short term financing would be used to finance current assets including seasonal fluctuations.

Accepted Answer

A) True 
 B)False

Question 19

Under ___________________ a factor pays the firm for its receivables before the account due date.

Accepted Answer

A)  reverse factoring 
B)  maturity factoring 
C)  advance factoring 
D)  nonrecourse factoring 
A)  reverse factoring 
B)  maturity factoring 
C)  advance factoring 
D)  nonrecourse factoring

Question 20

The Small Business Administration cannot assist in the financing of small enterprises by:

Accepted Answer

A)  making direct loans to businesses 
B)  participating jointly with private banks in extending loans to businesses 
C)  engaging in accounts receivable factoring 
D)  agreeing to guarantee a bank loan 
A)  making direct loans to businesses 
B)  participating jointly with private banks in extending loans to businesses 
C)  engaging in accounts receivable factoring 
D)  agreeing to guarantee a bank loan

A factor engages in accounts receivable financing for business by purchasing accounts outright and assuming all credit risks.

Commercial finance companies:

The practice of compensating balances is diminishing.

Which of the following organizations are involved in accounts receivable financing for businesses?

Which of the following is not a reason to use factoring services?

The effective annual interest rate on a loan in which a company borrows $1,000,000 for one year at 8 percent and requires a compensating balance of 20 percent is:

A claim against an inventory when individual items are indistinguishable is called a complete inventory lien.

A commercial finance company:

Where the factor pays the firm for its receivables before the account due date.

Service industries tend to have larger proportions of fixed assets to current assets.

Short-term financing offers greater flexibility than long-term financing.

In order to borrow $2,225,000 for a 7.5% loan on discount basis, the firm will actually have to borrow:

Which of the following might is not a characteristic of a field warehouse?

Firms using maturity matching will have current ratios equal to 1.0.

The purchaser may deduct 2% from the purchase price if payment is made within 10 days; but if not paid within 10 days, the net amount of the purchase is due within 30 days. The sale is made on what terms?

The maturity matching approach is a financing strategy that attempts to match the maturities of assets with the maturities of the liabilities which they are financed.

A short-term bank loan that is unsecured is referred to as:

Using the conservative approach for financing a firm's assets, long term financing would be used only to finance fixed assets, while short term financing would be used to finance current assets including seasonal fluctuations.

Under ___________________ a factor pays the firm for its receivables before the account due date.

The Small Business Administration cannot assist in the financing of small enterprises by:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 16: Short-Term Business Financing

A factor engages in accounts receivable financing for business by purchasing accounts outright and assuming all credit risks.

Commercial finance companies:

The practice of compensating balances is diminishing.

Which of the following organizations are involved in accounts receivable financing for businesses?

Which of the following is not a reason to use factoring services?

The effective annual interest rate on a loan in which a company borrows $1,000,000 for one year at 8 percent and requires a compensating balance of 20 percent is:

A claim against an inventory when individual items are indistinguishable is called a complete inventory lien.

A commercial finance company:

Where the factor pays the firm for its receivables before the account due date.

Service industries tend to have larger proportions of fixed assets to current assets.

Short-term financing offers greater flexibility than long-term financing.

In order to borrow $2,225,000 for a 7.5% loan on discount basis, the firm will actually have to borrow:

Which of the following might is not a characteristic of a field warehouse?

Firms using maturity matching will have current ratios equal to 1.0.

The purchaser may deduct 2% from the purchase price if payment is made within 10 days; but if not paid within 10 days, the net amount of the purchase is due within 30 days. The sale is made on what terms?

The maturity matching approach is a financing strategy that attempts to match the maturities of assets with the maturities of the liabilities which they are financed.

A short-term bank loan that is unsecured is referred to as:

Using the conservative approach for financing a firm's assets, long term financing would be used only to finance fixed assets, while short term financing would be used to finance current assets including seasonal fluctuations.

Under ___________________ a factor pays the firm for its receivables before the account due date.

The Small Business Administration cannot assist in the financing of small enterprises by:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters